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District Court Shifts Costs to the DOJ for Production of Documents by Non-parties
Practical Law Legal Update 8-523-2086 (Approx. 3 pages)
District Court Shifts Costs to the DOJ for Production of Documents by Non-parties
by PLC Antitrust
| Published on 20 Dec 2012 • USA (National/Federal) |
The US District Court for the Eastern District of Michigan in United States v. Blue Cross Blue Shield of Michigan (BCBS) ordered the government to share a portion of non-party expenses in connection with producing documents for the DOJ's antitrust case against BCBS.
On October 11, 2012, the US District Court for the Eastern District of Michigan in United States v. Blue Cross Blue Shield of Michigan (BCBS) ordered the government to share a portion of non-party expenses in connection with producing documents for the DOJ's antitrust case against BCBS.
Background
In its underlying antitrust complaint, the DOJ alleged that BCBS reduced competition in the health insurance market in Michigan by including most-favored-nation (MFN) clauses in its contracts with certain hospitals. In connection to those allegations, the DOJ in early 2010 served Civil Investigation Demands (CIDs) on numerous third parties, among them hospitals that had contracted with BCBS. Two hospitals, MidMichigan Health and Covenant HealthCare (collectively, Hospitals) refused to comply with the CIDs, asserting that the requests were both:
- Unduly burdensome.
- Of questionable relevance to the underlying claims against BCBS.
The DOJ later served the Hospitals with subpoenas and filed a Motion to Compel Production of Documents.
Outcome
Magistrate Judge Mona K. Majzoub ordered the Hospitals to produce the documents and then considered the cost-shifting issue. Her opinion relied on Rule 45(c) of the Federal Rules of Civil Procedure, which allows a party to issue a third-party subpoena if the issuing party reasonably avoids imposing an undue burden or expense on the non-party. To determine whether an undue burden exists, courts balance the potential value of the information sought against the cost, effort and expense imposed on the producing party. Judge Majzoub held that under Rule 45(c), an order compelling a non-party production must protect the non-party from significant expense.
If the burden is found to be undue and the cost significant at the court's discretion, the party seeking discovery must bear enough of the expense to make the non-party's portion non-significant. To determine how much of the total cost to shift to the requesting party, courts balance these three factors:
- The non-party's interest in the case outcome.
- Whether the non-party can bear the cost more easily than the requesting party.
- The public importance of the case.
Judge Majzoub held that the Hospitals' production costs were significant at $14,720 and $16,127, ordering the government to pay 15% of the total production costs. Judge Majzoub's decision to shift only a small percentage of the costs was based on her findings that:
- The Hospitals knowingly entered into agreements containing MFN clauses and should have anticipated that those clauses could result in litigation.
- The case outcome may affect the Hospitals' contracts with BCBS.
- Both the DOJ and the Hospitals can easily bear the cost of production.
- The case is of public importance because if affects competition in the healthcare industry.
Practical Implications
United States v. Blue Cross Blue Shield is notable for antitrust purposes because compulsory document requests on non-parties often arise in antitrust actions. Requesting parties (including the federal antitrust agencies) and non-parties should be aware that the cost of production may be shifted, based on the discretion of the presiding judge.